"If the rocket fire from Gaza continues, we will hit back severely, so much so that the terrorist organisations will understand that Israel is not ready to resign itself to this," Olmert said at the weekly cabinet meeting.

His comments came six weeks after the end of Israel's three-week war on Gaza, which left more than 1,300 Palestinians and 13 Israelis dead and destroyed homes and infrastructure throughout the Hamas-ruled territory.

A donors conference takes place in Egypt Monday to finance reconstruction of the Gaza Strip.

Palestinian militants have fired more than 100 rockets and mortar rounds at Israel since the fragile January 18 truce that ended Israel's massive military offensive on Gaza.

Israel has in turn carried out several air raids targeting alleged militants, weapons caches and smuggling tunnels beneath the Gaza-Egypt border.

Egypt has been struggling to mediate a more permanent ceasefire between the two sides in recent weeks but the talks have shown little sign of progress.